America's Top Cybercop

For nearly two years, Fortuna's scam worked like a dream. The Web site offered testimonials from people who had made a bundle and explained that the secret to the financial alchemy was the "Fibonacci Sequence" -- a mathematical series in which each number equals the sum of the previous two. (FTC economists later determined that relying on the Fibonacci Sequence ensured that 95% of participants would end up losing money.) The money rolled in -- some $11 million from more than 25,000 people in 70 countries -- and Fortuna transferred most of its $5 million in profits to a bank account in Antigua. Somewhere, Carlo Ponzi was smiling.

But in Washington, the Bureau of Consumer Protection was getting wind of the scam from consumers who had been duped. Bernstein and her team investigated and then brought down the hammer. They froze Fortuna's assets and replaced the Web site's breathless promises with a stern notice from the FTC. They ordered the offshore funds returned to the United States. And when the scammers didn't comply, the FTC tracked them down in Belize and issued civil-arrest warrants. To date, Bernstein's office has recovered roughly $5.5 million for more than 15,000 victims of the Fortuna scam. "That case was really humongous," Bernstein says. "And it was a little scary. Some of us thought that the Internet would bring us back to the Wild West."

The Fortuna case represents one category of Internet fraud that Bernstein's office tries to battle: old tricks in a new medium -- pyramid schemes, chain letters, false advertising, and other familiar scams that have gone dotcom. The Internet, it turns out, is a fabulous tool for fraud. Boiler-room operations once required a basement full of telephones and people. Today, all you need is a modem. Direct-mail fraud once required stamps, envelopes, and a physical address. Today, it requires little more than a free email account and an underactive conscience. One hundred years ago, a peddler would wheel into town, set up his cart on the corner, sell bottles of magic elixir, and move on to a new town before his customers discovered that the snake oil didn't work. Today, new-economy snake-oil sellers can wheel into any town they want -- without ever leaving their keyboards.

But Bernstein's team is also battling a second, very different variety of Internet fraud: new scams that have come about because of a new medium. Let's look at the case of the Moldovan modem jacker.

A few years ago, people who visited sites like [WEB_ADDRESS] or [WEB_ADDRESS2] were offered free pictures. But in order to see the tantalizing images, visitors first had to download a special viewer program called "david.exe." Here's what happened to anybody who clicked open this file: First, the program disconnected the person from his Internet-service provider. Then it silenced the speaker on the person's modem. Next it dialed a number in Moldova and reconnected the person to an overseas ISP. The cost of the call: $2 per minute for every minute that the computer was on.

When consumers began noticing extremely expensive calls to eastern Europe on their phone bills, they called the FTC. Lawyers from Bernstein's office worked with AT&T and MCI to find the business partners who had executed the scheme. It turned out that they were running other adult-entertainment sites that also were hijacking modems. (It also turned out that the calls that supposedly were routed to Moldova really went to Canada -- a scam within a scam.) In the end, the agency recovered about $2 million for more than 27,000 people who were looking for a cheap thrill and ended up with an expensive phone bill.

"Sometimes I think to myself, 'Gosh, if these guys ever went into legitimate business, they'd be really successful.' " says Bernstein. "Some of them are really ingenious."

Other new tricks are invisible. For instance, most Web sites contain "metatags," a collection of keywords coded onto the site's front page. You can't see these metatags when you arrive at a site (unless you click on "Source," in your browser's "View" menu, and open up the underlying code). But the metatags are a crucial part of the architecture, because search engines comb metatags to determine whether a particular site includes what the searcher is seeking. (On fastcompany.com, the Fast Company home page, for example, the metatags include "business," "career search," "brand you," and about two dozen other key phrases.) But what if somebody lied? That's what a few companies did earlier this year. They inserted phrases like "arthritis cure," "cancer treatment," and "cancer cure" into their metatags -- even though the products that they were peddling didn't cure anything. So when desperate people looking for a miracle punched one of those phrases into a search engine, they arrived at the digital doorstep of someone ready to swindle them. It was snake-oil-salesman heaven: The con artist didn't have to go to the customers. Thanks to metatags, the customers came to the con artist.

The Internet confers on scam artists the same benefits that it offers entrepreneurs: minimal barriers to entry; the ability to experiment with new business models; free and instantaneous, 24-7 communication with an international market. All of these things have made life easier for bad guys. But Bernstein understood something else about the Internet's impact: Its strengths could also work for the good guys.